Prepare Statement of Cash Flows using indirect method
An analysis of comparative balance sheets, the current year's income statement, and the general ledger accounts of Conard Corp. uncovered the following items. Assume all items involve cash unless there is information to the contrary.
(a) Payment of interest on notes payable (h) Issuance of capital stock
(b) Exchange of land for patent. (i) Amortization of patent.
(c) Sale of building at book value. (j) Issuance of bonds for land.
(d) Payment of dividends. (k) Purchase of land.
(e) Depreciation. (l) Conversion of bonds into
(f) Receipt of dividends on investment common stock.
in stock. (m) Loss on sale of land.
(g) Receipt of interest on notes receivable. (n) Retirement of bond.
Indicate how each item should be classified in the statement of cash flows using these four major classifications: operating activity (indirect method), investing activity, financing activity, and significant noncash investing and financing activity.
The current sections of Leach Inc.'s balance sheets at December 31, 2010 and 2011, are presented here.
Leach's net income for 2011 was $153,000. Depreciation expense was $24,000.
Cash $105,000 $99,000
Accounts receivable 110,000 89,000
Inventory 158,000 172,000
Prepaid expenses 27,000 22,000
Total current assests $400,000 $382,000
Accrued expenses payable $15,000 $5,000
Accounts payable 85,000 92,000
Total current liabilities $100,000 $97,000
Prepare the net cash provided by operating activities section of the company's statement of cash flows for the year ended December 31,2011, using the indirect method.
Willingham Corporation's comparative balance sheets are presented below.
Comparative Balance Sheets
Cash $14,300 $10,700
Accounts receivable 21,200 23,400
Land 20,000 26,000
Building 70,000 70,000
Accumulated depreciation -15,000 -10,000
Total $110,500 $120,100
Accounts payable $12,370 $31,100
Common stock 75,000 69,000
Retained earnings 23,130 20,000
Total $110,500 $120,100
1. Net income was $22,630. Dividends declared and paid were $19,5000.
2. All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. The land was sold for $4,900.
(a) Prepare a statement of cash flows for 2011 using the indirect method.
(b) Compute free cash flow.
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